State labor council: BPA power agreement for Ferndale smelter could soon be decided

After nearly a year of Intalco power negotiations, a state union representative close to the discussions said Bonneville Power Administration (BPA) could have a decision as soon as within a week for the aluminum smelter’s potential buyer. However, a BPA spokesperson says conversations remain in a preliminary phase.

“We are making progress but we’re not there yet,” Washington State Labor Council (WSLC) president Larry Brown told The Northern Light. “I think we should know in the next week or two.”

However, a BPA spokesperson said only basic conversations had been held since Blue Wolf Capital Partners LLC, a New York City based private-equity firm seeking to purchase the smelter, reached out to the federal agency in July 2021.

WSLC, which represents the interests of local smelter workers and other state union members, is assisting Blue Wolf secure a BPA power contract. Despite other challenges, many supporters of restarting the idled Ferndale smelter have considered the BPA power contract the last major obstacle to restarting the facility. Blue Wolf would purchase Alcoa’s plant once it secured enough power to restart the facility at a profitable price. Alcoa has signed a letter of intent to sell the smelter to Blue Wolf, according to a March 9 letter U.S. Congressman Rick Larsen (WA-02) wrote to BPA administrator John Hairston.

A Blue Wolf spokesperson declined to comment as the company is under a nondisclosure agreement during negotiations.

Pittsburgh-based Alcoa curtailed its Ferndale Intalco Works smelter in summer 2020 as low aluminum prices made the business less profitable, putting 700 employees without work.

Port of Bellingham officials named Blue Wolf as a prospective buyer in late January, just as $7.6 million was added to the governor’s budget to restart the smelter with “greener” operations in addition to $2.4 million that had already been secured in the state budget to reopen the smelter. The money can be used until June 2025 from the budget governor Jay Inslee signed in late March.

BPA spokesperson Doug Johnson said Blue Wolf first contacted BPA in July 2021.

“All we’ve had are basic discussions on what BPA has to offer and what they need to restart the plant,” Johnson said.

Johnson said BPA does not have enough surplus power to fulfill Blue Wolf’s needs. For context, Blue Wolf is looking for 400 megawatts of power, which is nearly a third of what BPA provides the city of Seattle annually.

“At this point, we know in the ballpark of what we could potentially contribute but we certainly could not do the full amount,” he said.

Johnson said BPA hasn’t gotten to the point of discussing exact figures, but may be able to offer 20-25 percent of its power. BPA provided 75 megawatts in its last contract with Alcoa, although that number varied throughout the years.

Blue Wolf is considering other power providers in addition to BPA.

“They are looking into other sources,” Brown said. “It’s not impossible for them to gain a portion of their power needs from other providers. But it appears to me, at least it seems, impossible to do a restart without some of the power coming from BPA.”

BPA can’t offer Blue Wolf its low-cost industrial power rate, as it did with Alcoa, because Blue Wolf is not one of the companies listed in the 1980 Northwest Power Act. Alcoa terminated its industrial customer status when its contract ended.

As an alternative, BPA is offering Blue Wolf a market rate, which Johnson said is significantly higher than the current industrial rate. He couldn’t give a difference between the market and industrial rates; the industrial rate averages $40 per megawatt but couldn’t provide a market rate for a potential offer.

“We have no problem talking with them about BPA’s potential contribution to a portfolio to restart the plant,” Johnson said.

Both state and congressional lawmakers have pushed for BPA to assist in restarting the Ferndale plant, which is the last aluminum smelter west of the Mississippi. Most recently, state representatives Sharon Shewmake (D-Bellingham), Alicia Rule (D-Blaine), Alex Ramel (D-Bellingham) and three other Democratic lawmakers wrote a letter to BPA encouraging it to reach a power deal.

The lawmakers asked for BPA to reach an agreement, in part, because domestic aluminum production would be subject to stricter environmental and labor regulations opposed to outsourcing production. Under the state’s funding to make the smelter more environmentally friendly, it would reduce greenhouse gases over 90 percent and particulate matter emissions over 50 percent. It had previously been reported that the smelter would become one of two “green” aluminum plants in the U.S.

The lawmakers also mentioned restarting the plant would strengthen national supply chain resiliency, which has been highlighted during Russia’s war in Ukraine. Domestic aluminum production had moved to Russian, Chinese and Indian markets, lawmakers wrote.

Once restarted, the plant would produce more aluminum than the U.S.’s current Russian aluminum imports.

State lawmakers wrote in the letter that the Ferndale facility could reopen as soon as this year if a contract is agreed upon. But other issues such as finding employees and affordable homes for those employees would need to be worked through.

Ferndale mayor Greg Hansen told The Northern Light in January that housing scarcity could throw a wrench in plans to bring 700 employees, half of which are estimated to be new employees. Bellingham Technical College and an upcoming Lummi Nation technology training center are expected to train the new workforce.

Intalco signed an agreement with the state Department of Ecology (DOE) in January 2021, after the smelter idled, that requires the facility to submit a four-factor analysis to DOE 180 days in advance of reopening potlines. If not, smelter operators could face up to $10,000 per day per violation. DOE spokesperson Dave Bennett said the state agency has not yet received the

analysis.